Principles Of Natural Gas Leasehold Valuation (9bb2b97a-67fb-436f-96de-7cfbcb99b477)

F. G. CLAPP, New York, N. Y. (communication to the Secretary*).¬I assume that where this valuable paper states, near its end, that "it is not possible to establish a market price, " the author means that no particular price which will fit all conditions and fields can be given. I am not in agreement with Mr. Wyer, however, that the actual value of natural gas leaseholds is "largely a matter of opinion." I would even be willing to express myself very strongly as believing that if we, as experts, cannot give anything closer than a mere opinion, our testimony or reports are not of great value to our clients. I believe, moreover, that by detailed geological examinations and with our latest knowledge of geological structure, principles of natural gas occurrence, etc., we can approach just as near a certainty in natural gas valuations as we can in oil valuations, and much more so than in the valuation of many metal prospects, in which only the upper few feet of the vein has been opened. In other words, we are getting nearer and nearer every year to bringing geology as applied to oil and gas development into the class of an exact science. Mr. Wyer's paper gives an excellent outline for methods of leasehold valuation. Being presumably intended as an outline only, it can be expanded indefinitely by a detailed discussion of the methods of valuation for the four different classes of leaseholds which he mentions: (A) "Producing;" (B) "Protective;" (C) "Reserve;" and (D) "Prospective." This classification is probably as good as can be made in practice. In the producing leaseholds in particular it is easy to establish a market price at which these leaseholds should be bought or sold. The question would arise in any case whether or not the leases are connected with a pipe line or the distance from the pipe line. Assuming that a pipe line already taps the property and that gas is already being sold for a certain figure, this price must be multiplied by the number of thousand cubic feet still "in sight" in the ground, from which is to be deducted (a) bonuses, (b) rentals, (c) royalties, (d) cost of drilling, (e) taxes and